The GDS / TDS tool is an advanced tool that allows you to view what percentage of your income will be dedicated to home related payments such as mortgage payments, property taxes, condo fees, heat, etc.. (GDS)
and also what percentage of your income will be dedicated to your home related payments plus all your other debt payments such as credit card payments and/or car payments. (TDS)
About Debt Service Ratios (GDS / TDS)
Since lenders only lend you a maximum amount of mortgage, they'll want to make sure that your monthly home ownership costs can fall somewhere between 32% and 39% of your family income (if your partner is a co-applicant).
This special percentage is called Gross Debt Service (GDS). The better your credit score is, the higher the GDS ratio is for you and the more of a loan a lender is willing to trust you with.
There is also another special percentage called Total Debt Service (TDS), which just like the name implies, looks at all your debt payments, such as credit card and car payments.
Here is a summary on GDS/TDS
- GDS (gross debt service) is the percentage of your salary that can be used towards all home ownership expenses, including mortgage, heat, utilities, property tax. With an excellent credit score you can go up to 39% of your annual income.
- TDS (total debt service) is the percentage of your salary that can be used towards all home ownership expenses plus any other monthly debt commitments you may have, such as car payment and credit cards. This can go up to 44%.